New Delhi: In an ambitious policy initiative that could prove to be a game−changer for UPA−II, Prime Minister Manmohan Singh Monday announced direct cash payout of subsidies to beneficiaries from Jan 1, 2013.

The subsidy amount would be transferred to beneficiaries' bank accounts linked to Aadhaar cards.

The scheme is expected to cut down waste and corruption in distribution of subsidised items, the prime minister said, chairing the first meeting of the National Committee on Direct Transfers.

He asked all ministries "to work in right earnest" for implementation of this pioneering initiative and also exhorted the departments to work in close coordination to enable poor people to open bank accounts smoothly.

Initially, the government will implement the scheme for cash transfer to the beneficiaries' accounts in 51 districts from Jan 1, 2013. The scheme will be worked in 18 states from April and in the rest of the country later in 2013, the prime minister said.

The scheme will be operationalised by leveraging the Aadhaar platform.

The prime minister also asked the finance ministry and the Unique Identification Authority of India (UIDAI) to work closely to ensure the success of the scheme.

"I would expect the finance ministry and the Unique Identification Authority to work in close coordination to achieve a collective goal (of financial inclusion)," he said in statement here.

The scheme, which has been unveiled barely 18 months before the next elections, could prove to be a potential game changer for the United Progressive Alliance−II, which has been besieged by charges of corruption.

It is expected to reap rich electoral dividends in the same manner the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) worked for the UPA−I.

Manmohan Singh underlined the need for integrating the banking system with the post office network, especially in the rural parts of the country to move closer towards the goal of financial inclusion.

He also asked the UIDAI to ensure that the coverage of Aadhaar is adequate as per the roll out plan and no one is left out, and Aadhaar number should be available on demand if beneficiaries are getting left out.

"The funds that are provisioned for direct benefits like pensions, scholarships and health−care benefits must reach the intended beneficiaries without delays and leakages," the prime minister said.

"Apart from these direct benefits, the government also provides an amount of over 300,000 crore rupees in subsidies which too must reach the right people," he added.

"Direct Cash Transfers, which are now becoming possible through the innovative use of technology and the spread of modern banking across the country, open the doors for eliminating waste, cutting down leakages and targeting beneficiaries better."

"We have a chance to ensure that every rupee spent by the government is spent truly well and goes to those who truly deserve it," he added.

"They will need to digitize their databases, most of which are with the states, and seed them with Aadhaar numbers. You will be provided help by both the Unique Identification Authority and the IT ministry. But, you will in turn need to assist the states," he said.

Manmohan Singh underlined that the twin pillars for the success of the system of scheme are the Aadhaar platform and financial inclusion. "If either of these pillars is weak, it would endanger the success of the initiative."